Karasco, You're like a cat on a hot tin roof - I'll try to help...

Karasco,

You're like a cat on a hot tin roof - I'll try to help settle you down but this might not help.

You need to look at FMG's half-year results to get some better insight into their numbers.

Here's the link

http://www.asx.com.au/asxpdf/20150217/pdf/42wn4vdvdxksx7.pdf

The Notes to the accounts are the critical part (notes 5 and 6) on page 18. They show total costs for the half of USD 4,108 million (note 5) and USD 81 million (note 6). However, on the bottom of page 5, they talk about costs of $2434 million and a cash cost of $30 per wmt.

So why the difference ??

Shipping costs, government royalties and other non-mining expenses aren't included in the calculation, nor is depreciation and amortisation. Add in Finance expenses (note 7) and the total number is now USD 4.4 billion.

So on 80 million tonnes, the real cost is closer to USD 55 per wmt. Given the infrastructure they have is already paid for,  depreciation and amortisation is a non-cash item, so USD 4.4 billion is more like USD 3.8 billion, or a real cash cost of USD 47 per wmt.

When you look at the cashflow statement on page 14, you can see payments of USD 3520 million and further down interest paid of USD 290 million, so close enough to USD 3800 million.

So the refinance today is marginal in the scheme of things.

Key issues are ore price, ore price and ore price and whether total operating costs can fall fast enough (oil rising and ore falling is not great as the shipping benefit and operating benefit is reduced).

I think these guys survive but a higher USD (weaker AUD, Brazilian real) will only push ore prices down, so things might get tighter before they get some cleaner air.